Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
THE DEWOLFE COMPANIES, INC.
(Name of Registrant as Specified in its Charter)
---------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
-------------------------------------------------------------------------
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
[LOGO]
DeWolfe
One Stop and you're home.(R)
April 2, 1999
Dear Stockholder:
We are pleased to invite you to attend the 1999 Annual Meeting of
Stockholders of The DeWolfe Companies, Inc., which will be held at the Newton
Marriott, 2345 Commonwealth Avenue, Newton, Massachusetts (Route 128 and the
Massachusetts Turnpike) on Tuesday, May 11, 1999, commencing at 10:00, Eastern
time.
A description of business to be conducted at the Annual Meeting is in the
attached Notice of Annual Meeting and Proxy Statement. Also enclosed is a copy
of our Annual Report for 1998.
Your vote is important no matter how many shares you own. We hope you will
be able to attend the meeting in person, but if you cannot, please sign and
date the enclosed proxy and return it in the accompanying envelope. If you plan
to attend, please check the appropriate box on the proxy card.
Sincerely,
/s/ Richard B. DeWolfe
RICHARD B. DEWOLFE
Chairman and
Chief Executive Officer
THE DEWOLFE COMPANIES, INC.
80 Hayden Avenue
Lexington, Massachusetts 02173
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders will be held on May 11, 1999 at 10:00
a.m. Eastern Time at the Newton Marriott, 2345 Commonwealth Avenue, Newton,
Massachusetts (Route 128 and the Massachusetts Turnpike), for the following
purposes:
1. To fix the number of directors and to elect directors of the Company
for the ensuing year and until their respective successors are chosen
and qualified;
2. To consider and act upon a proposal to amend the Company's 1998 Stock
Option Plan;
3. To ratify the Company's selection of Ernst & Young LLP as auditors of
the Company for the year ending December 31, 1999; and
4. To consider and act upon matters incidental to the foregoing and to
transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on March 15, 1999
as the record date for the determination of stockholders entitled to receive
notice of, and to vote at, the Annual Meeting of Stockholders.
By order of the Board of Directors,
PAUL J. HARRINGTON,
Clerk
April 2, 1999
The Company's Annual Report for 1998 containing a copy of the Company's
Form 10-K (excluding exhibits) for the year ended December 31, 1998 is enclosed
herewith.
Please fill in, date, sign and mail promptly the accompanying proxy in the
return envelope furnished for that purpose, whether or not you plan to attend
the meeting.
THE DEWOLFE COMPANIES, INC.
80 Hayden Avenue
Lexington, Massachusetts 02173
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 11, 1999
This statement is furnished to the stockholders of THE DEWOLFE COMPANIES,
INC. (hereinafter, the "Company") in connection with management's solicitation
of proxies to be used at the Annual Meeting of Stockholders on May 11, 1999 and
at any adjournment of that meeting. The approximate date on which this proxy
statement and accompanying proxy are being sent to stockholders of the Company
is April 2, 1999. Each proxy delivered pursuant to this solicitation is
revocable at the option of the person executing the same by written notice
delivered to the Clerk of the Company at any time before the proxy is voted. A
stockholder who attends the Annual Meeting in person may revoke his or her
proxy at that time and vote his or her shares if such stockholder so desires.
The presence in person or by proxy of stockholders entitled to cast a majority
of the outstanding shares, or 1,679,615 shares, shall constitute a quorum. With
respect to the election of Directors, the Company will treat votes withheld as
shares that are present for purposes of determining a quorum. A plurality is
required to elect Directors, so the four persons receiving the greatest number
of votes will be elected. Withheld votes will not affect the outcome of the
election. With respect to the approval of the amendment of the 1998 Stock
Option Plan and the approval of auditors, the Company will treat abstentions as
shares that are present and entitled to vote for purposes of determining a
quorum. Since a majority of the shares represented at the meeting and entitled
to vote is required for approval, abstentions will have the effect of a vote
against approval of these proposals. If a broker indicates on a proxy that it
does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will be considered as present for quorum
purposes but not as shares entitled to vote with respect to that matter.
Accordingly, broker non-votes will have no effect on such a matter.
All shares represented by a properly executed proxy will be voted unless
it is revoked and, if a choice is specified, will be voted in accordance with
such specification. If no choice is specified, the proxies will be voted FOR
the election of four directors, unless authority to do so is withheld with
respect to one or more of the nominees, FOR the approval of the amendment of
the 1998 Stock Option Plan, and FOR the ratification of the Company's selection
of Ernst & Young LLP as auditors for the year ending December 31, 1999. In
addition, the proxy will be voted in the discretion of the proxy holders with
respect to such other business as may properly come before the meeting. The
officers and directors of the Company as a group own beneficially 61%
(excluding, for this purpose, options and warrants) of the outstanding shares
of Common Stock of the Company (see "Principal Stockholders and Stockholdings
of Management"). The Company expects that its officers and directors will vote
the shares owned by them FOR the election of such four nominees, FOR the
approval of the amendment of the 1998 Stock Option Plan, and FOR the
ratification of the Company's selection of Ernst & Young LLP as auditors.
As of March 15, 1999, the Company had outstanding 3,359,228 shares of
Common Stock. Each share of the outstanding Common Stock is entitled to one
vote. Only holders of Common Stock of record on the books of the Company at the
close of business on March 15, 1999 will be entitled to receive notice of, and
to vote, at the Annual Meeting.
ELECTION OF DIRECTORS
At the Annual Meeting, directors are to be elected to hold office for the
ensuing year and until their respective successors are chosen and qualified.
The Board of Directors has fixed the size of the Board at four, subject to the
ratification by the stockholders at the Annual Meeting and has nominated four
persons, all of whom are now directors of the Company, to serve until the next
Annual Meeting of Stockholders and until their successors are elected and
qualified. If the enclosed proxy is duly executed and received in time for the
Meeting, and unless authority to do so is withheld, it will be voted to elect
as directors the following nominees: Richard B. DeWolfe, A. Clinton Allen, R.
Robert Popeo and Paul R. Del Rossi. (For a description of the business
experience of such nominees, see "Business Experience of Nominees and Executive
Officers" below.) In the event that any of the nominees becomes unavailable,
then the proxy holders shall have the right: (i) to vote for such substitute,
if any, as the present Board of Directors may designate; (ii) to leave a
vacancy on the Board; or (iii) to fix the number of directors for the ensuing
year at less than four.
The Company did not have a nominating committee of the Board of Directors
in 1998. The Stock Option Committee, whose members are Messrs. Popeo and Del
Rossi, administers the Company's 1998 Stock Option Plan, and, administered,
until its discontinuance in February, 1998, the Company's 1992 Stock Option
Plan. The Stock Option Committee held one meeting in 1998. The Compensation
Committee, whose members are Messrs. Allen, Popeo and Del Rossi, met one time.
The Audit committee, whose members are Messrs. Popeo and Del Rossi, met one
time during 1998. During the year ended December 31, 1998, there were six
meetings of the Board of Directors. All of the directors attended, in person or
by telephone, at least 75% of the meetings of the Board of Directors. The
directors regularly consult with management and are kept informed of business
developments and financial results as they occur.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on its review of copies of reports filed pursuant to Section
16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or written representations from persons required to file such reports
("Reporting Persons"), the Company believes that, except as follows, all such
filings required to be made by such Reporting Persons were timely made in
accordance with the requirements of the Exchange Act. Messrs. Allen, Popeo and
Del Rossi each filed a Form 4 to report the grant of an option to him in
January, 1998 after the date specified therefor.
BUSINESS EXPERIENCE OF NOMINEES AND EXECUTIVE OFFICERS
Following is a list of names, ages and positions with the Company of all
nominees for election as directors and all executive officers of the Company.
Name Age Position
- ------------------------------ ----- ----------------------------------------------------------------------
Richard B. DeWolfe ........... 55 Chief Executive Officer, President and Treasurer, Chairman of the
Board of Directors, and Nominee
A. Clinton Allen ............. 55 Director, Vice Chairman of the Board of Directors, and Nominee
R. Robert Popeo .............. 60 Director and Nominee
Paul R. Del Rossi ............ 56 Director and Nominee
Paul J. Harrington ........... 46 Chief Operating Officer, Executive Vice President and Clerk;
President of The DeWolfe Company, Inc.
Patricia A. Griffin .......... 53 Senior Vice President; President of DeWolfe Relocation Services, Inc.
2
Name Age Position
- --------------------------- ----- -------------------------------------------------------------
James A. Marcotte ......... 41 Senior Vice President and Chief Financial Officer
Gail F. Hayes ............. 50 Vice President; President of DeWolfe Mortgage Services, Inc.
Richard A. Pucci .......... 43 Vice President; President of DeWolfe Insurance Agency, Inc.
All Directors hold office until the next annual meeting of stockholders or
until their successors are elected. Except as noted below, no officer holds his
office for a fixed term and the Board of Directors may terminate any officer's
term of office. Except as noted below, each officer and director described
below has been employed at his or her present place of employment for more than
five years.
Richard B. DeWolfe is the Company's Chief Executive Officer, President and
Treasurer, and the Chairman of the Board of Directors of the Company.
A. Clinton Allen has been Vice Chairman and a Director of the Company
since 1991. Mr. Allen is Chairman and Chief Executive Officer of A.C. Allen &
Company, Inc., an investment banking consulting firm located in Cambridge,
Massachusetts. He is a director of Response USA, Inc., The Legal Club of
America, Image Guided Technologies, Inc., Diversified Corporate Resources,
Inc., Swiss Army Brands, Inc., and Psychemedics Corporation, where he serves as
Vice Chairman.
R. Robert Popeo has been a Director of the Company since 1992. Mr. Popeo
is a member of the law firm of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C., of Boston, Massachusetts and currently serves as its Chairman.
Paul R. Del Rossi has been a Director of the Company since 1992. Mr. Del
Rossi is President of General Cinema Theaters, Inc.
Paul J. Harrington has served as Chief Operating Officer of the Company
and as President of The DeWolfe Company, Inc., the Company's real estate sales
subsidiary, since August, 1997. Mr. Harrington was named an Executive Vice
President of the Company in March, 1995. From 1992 until August, 1997 he served
as President of DeWolfe Mortgage Services, Inc. He has also served as Clerk of
the Company since 1992.
Patricia A. Griffin is the Company's Senior Vice President and President
of DeWolfe Relocation Services, Inc. Ms. Griffin is Mr. DeWolfe's sister.
James A. Marcotte was appointed the Company's Chief Financial Officer and
Senior Vice President effective in June, 1996. From September, 1992 until June,
1996 Mr. Marcotte served as Senior Vice President and Chief Financial Officer
of First NH Mortgage Corporation. Prior to September, 1992 he was employed by
the Federal Deposit Insurance Corporation.
Gail F. Hayes has been a Vice President of the Company and President of
DeWolfe Mortgage Services, Inc. since September, 1997. Prior to joining the
Company, Ms. Hayes served as Senior Vice President of Knutson Mortgage
Corporation, of Bloomington, Minnesota. She served as President of the
Minnesota Mortgage Bankers Association from 1994 to 1995. She is also a
Certified Mortgage Banker.
Richard A. Pucci joined the Company on May 18, 1998 as Vice President and
as President of DeWolfe Insurance Agency, Inc. in connection with the Company's
acquisition of the personal lines of Curtin Insurance Agency, Inc., on such
date. Mr. Pucci was formerly the President of Curtin Insurance Agency, Inc.
3
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has made advances and loans to Mr. DeWolfe on various dates,
including: advances and demand notes in the aggregate principal amount of
$66,000 that bear interest at prime plus one-half percent, and a year term
loan; a term note in the amount of $186,000 which Mr. DeWolfe delivered to the
Company in payment of the exercise price of a stock option granted to him in
1993; and a term note in the amount of $414,876 which Mr. DeWolfe delivered to
the Company in payment of the exercise price of a stock option granted to him
in 1994. The term notes are due on April 27, 2000 and February 10, 2001 and
bear interest at prime plus one-quarter percent and are secured by the shares
acquired upon such exercises. The aggregate amount of principal and accrued
unpaid interest under all such advances and loans to Mr. DeWolfe was
approximately $693,000 at March 31, 1999.
As of December 31, 1998 the Company had outstanding indebtedness of
$415,000 to a lender which has been personally guaranteed by Mr. DeWolfe.
Until January, 1999, Amherst Street Realty Trust, an entity controlled by
Mr. DeWolfe, leased office space to the Company in Nashua, New Hampshire on an
oral tenancy-at-will basis. Such space consisted of 1,500 square feet and,
until October, 1995, it was used as a regional office for the Company. The
Company made payments of $37,053 to the trust in 1998 for rent, and to
reimburse the trust for insurance premiums and taxes paid by the trust. As of
December 31, 1998, the trust owed $51,000 to the Company pursuant to a non
interest bearing note which was secured by a mortgage on the property. In
January, 1999, the lease was terminated and the indebtedness was reduced by
$21,143.
Canton Avenue Realty Trust, an entity controlled by Mr. DeWolfe, leases
office space to the Company in Milton, Massachusetts. Such space consists of
3,750 square feet and is used for the Company's Milton sales center. The
Company made rent payments of $46,600 to such entity in 1998.
Until July, 1998, Wire Road Realty Trust, an entity controlled by Messrs.
DeWolfe and Harrington, leased office space to the Company in Merrimack, New
Hampshire on an oral tenancy-at-will basis. Such space consisted of
approximately 2,000 square feet and until September, 1997, was used for the
Company's Merrimack, New Hampshire sales center. The Company made rent payments
of $7,778 to such entity in 1998.
The Company believes, based upon its experience in the real estate
industry, that its current leases of office space from affiliated parties are
on terms no less favorable than those which could be obtained from unaffiliated
parties.
During fiscal year 1998 the Company paid consulting fees to Mr. Allen in
the aggregate amount of $72,000 relating to investor relations and mergers and
acquisitions.
On April 27, 1998 and on February 10, 1999, the Company made term loans to
Mr. Harrington in payment of the exercise prices of stock options granted to
him in 1993 and 1994. The principal amounts of the loans were $84,500, and
$120,250 and were repayable in two years and bear interest at prime plus
one-quarter percent. They are each secured by the shares acquired upon such
exercise. The aggregate amount of principal and accrued unpaid interest under
such loans to Mr. Harrington was $207,735 at March 31, 1999.
4
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Certain Other Compensation
The following table shows, for the fiscal years ended December 31, 1998,
1997, and 1996, the cash compensation paid by the Company and its subsidiaries,
as well as certain other compensation paid or accrued for such year, to the
Company's Chairman and Chief Executive Officer and to each of the four highest
paid executive officers of the Company other than the Chief Executive Officer
(collectively the "named executive officers").
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
---------------------------------------------------- -------------
Name and Other Annual Securities All Other
Principal Compensation Underlying Compensation
Position Year Salary ($) Bonus ($) ($) Options (#) ($)
- --------------------- ------ ------------ ----------- -------------- ------------- ---------------
Richard B. DeWolfe 1998 395,000 59,250 13,630(1) 100,000 11,093(2)
Chairman & 1997 351,469 108,150 5,306(3) 50,000 12,200(4)
Chief Executive 1996 307,292 64,000 12,890(3) 0 0
Officer
Paul J. Harrington 1998 249,423 56,250 11,539(5) 30,000 2,400(6)
Executive Vice 1997 197,808 54,375 11,000(5) 20,000 2,400(6)
President 1996 180,769 25,695 12,000(5) 20,000 0
Patricia A. Griffin 1998 164,758 28,620 5,875(7) 10,000 2,400(6)
Senior Vice 1997 143,854 21,140 0 10,000 2,400(6)
President 1996 129,808 9,375 1,647(3) 3,000 0
James A. Marcotte 1998 174,712 14,600 3,600(5) 25,000 2,400(6)
Senior Vice 1997 140,579 11,000 0 7,500 2,274(6)
President and 1996 63,462 0 0 6,000 0
Chief Financial
Officer
Gail F. Hayes 1998 166,385 35,100 6,000(5) 1,000 800(6)
Vice President 1997 51,692 0 2,077(5) 10,000 0
- ------------
(1) Includes $4,403 of commissions and $9,227 of expense allowances.
(2) Includes: $8,693, representing the value of the benefit to Mr. DeWolfe of
the remainder of premiums paid by the Company on his behalf pursuant to
the Company's "split dollar" insurance program; and $2,400 of Company
contributions for the benefit of Mr. DeWolfe under the Company's 401(k)
retirement plan.
(3) Represents commissions paid on transactions in which the named executive
served as a broker.
(4) Includes: $9,800, representing the value of the benefit to Mr. DeWolfe of
the remainder of premiums paid by the Company on his behalf pursuant to
the Company's "split dollar" insurance program; and $2,400 of Company
contributions for the benefit of Mr. DeWolfe under the Company's 401(k)
retirement plan.
5
(5) Represents amount paid as an expense allowance to the named executive
officer.
(6) Represents the Company's contribution for the benefit of the named
executive officer under the Company's 401(k) retirement plan.
(7) Includes $3,154 of commissions, and $2,721 of expense allowances.
Stock Option Grant Table
The following table contains information concerning the grant of stock
options to the named executive officers during the Company's fiscal year ended
December 31, 1998:
Options Grants in Last Fiscal Year
Potential Realizable
% of Total Value of Assumed
Options Exercise Annual Rate of Stock
Options Granted to or Base Appreciation for
Granted Employees in Price Expiration Option Term
Name (#) Fiscal Year ($/sh)(1) Date 0% 5% ($) 10% ($)
- -----------------------------------------------------------------------------------------------------------------------
Richard B. DeWolfe 31,500(2) 14 6.63(3) 2-03 0 33,579 97,020
68,500(2) 29 6.03(4) 2-03 0 114,121 252,080
Paul J. Harrington 30,000(5) 13 6.03(4) 2-03 0 49,980 110,400
Patricia A. Griffin 10,000(5) 4 6.03(4) 2-03 0 16,660 36,800
James A. Marcotte 25,000(5) 11 6.03(4) 2-03 0 41,650 92,000
Gail F. Hayes 1,000(5) 0.4 6.03(4) 2-03 0 1,666 3,680
- ------------
(1) The exercise price and the withholding obligations related to exercise may
be paid by delivery of already owned shares, subject to certain
conditions.
(2) These options were granted under the Company's 1998 Stock Option Plan and
have a term of 5 years. On a combined basis, they become exercisable with
respect to 25% of the shares covered thereby twelve months after the date
of grant and will become exercisable with respect to an additional 25% of
the shares covered thereby on each of the three successive anniversary
dates thereafter. Under the terms of the 1998 Stock Option Plan, the Stock
Option Committee may, in its discretion, accelerate the date on which any
option granted thereunder becomes exercisable in full; upon a change in
control of the Company, the options automatically become exercisable in
full.
(3) Represents 110% of the market value on the date of grant.
(4) Represents the market value on the date of grant.
(5) These options were granted under the Company's 1998 Stock Option Plan and
have a term of 5 years. They become exercisable with respect to 25% of the
shares covered thereby twelve months after the date of grant and will
become exercisable with respect to an additional 25% of the shares covered
thereby on each of the three successive anniversary dates thereafter.
Under the terms of the 1998 Stock Option Plan the Stock Option Committee
may, in its discretion, accelerate the date on which any option granted
thereunder becomes exercisable in full; upon a change in control of the
Company, the options automatically become exercisable in full.
6
Year-End Option Values
The following table sets forth information with respect to each of the
named executive officers concerning each exercise of stock options during the
fiscal year and the number and value of unexercised options held as of December
31, 1998.
Aggregate Option Exercises in Last Fiscal Year and Year-End Option Values
Number of unexercised Value of unexercised
options at fiscal in-the-money options at
year-end (#) fiscal year-end ($) (2)
----------------------------------- ------------------------------
Shares Value
Acquired Realized
Name on Exercise ($) (1) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- ------------- --------- --------------- ----------------- ------------- --------------
Richard B. DeWolfe 50,000 135,875 237,500 137,500 463,438 202,289
Paul J. Harrington 25,000 76,438 40,000 55,000 110,050 109,375
Patricia A. Griffin 2,000 5,865 14,000 19,000 37,926 36,651
James A. Marcotte 0 0 4,875 33,625 8,042 56,111
Gail F. Hayes 0 0 2,500 8,500 6,713 21,733
- ------------
(1) Value represents the difference between the closing price of the Common
Stock on the date of exercise and the exercise price, multiplied by the
number of shares acquired on exercise.
(2) Represents the fair market value of the Company's Common Stock on December
31, 1998 ($7.625 per share based on the closing price on the American Stock
Exchange) minus the exercise price per share, of the in-the-money options,
multiplied by the number of shares subject to each option.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
Effective May 21, 1992, Mr. DeWolfe entered into an employment contract
with the Company which is generally terminable with 90 days prior written
notice. Pursuant to the terms of this contract, Mr. DeWolfe serves as President
and Chief Executive Officer of the Company at a salary to be determined
annually by the Board. In addition, the contract includes provisions providing
Mr. DeWolfe with severance payments at the rate of his then current salary for
two years following the termination of his employment without cause and
restricting Mr. DeWolfe's right to compete with the Company for one year
following the termination of his employment for any reason. The Company owns a
$5 million "key man" life insurance policy on Mr. DeWolfe.
Effective May 21, 1992, Mr. Harrington entered into an employment contract
with the Company which is generally terminable with 90 days prior written
notice. Pursuant to the terms of this contract, Mr. Harrington serves as
Executive Vice President of the Company at a salary to be determined annually
by the Board of Directors. In addition, the contract includes provisions
providing Mr. Harrington with severance payments at the rate of his then
current salary for one year following the termination of his employment without
cause and restricting Mr. Harrington's right to compete with the Company for
one year following the termination of his employment for any reason.
Effective May 21, 1992, Ms. Griffin entered into an employment contract
with the Company which is generally terminable with 90 days prior written
notice. Pursuant to the terms of this contract, Ms. Griffin serves as Senior
Vice President of the Company at a salary to be determined annually by the
Board of Directors. In addition, the
7
contract includes provisions providing Ms. Griffin with severance payments at
the rate of her then current salary for one year following the termination of
her employment without cause and restricting Ms. Griffin's right to compete
with the Company for one year following the termination of her employment for
any reason.
Effective June 27, 1996, Mr. Marcotte entered into an employment contract
with the Company which is generally terminable with 90 days prior written
notice. Pursuant to the terms of this contract, Mr. Marcotte serves as Senior
Vice President and Chief Financial Officer of the Company at a salary to be
determined annually by the Board of Directors. In addition, the contract
includes provisions providing Mr. Marcotte with severance payments at the rate
of his then current salary for one year following the termination of his
employment without cause and restricting Mr. Marcotte's right to solicit
employees or associates of the Company for two years following the termination
of his employment for any reason.
Effective September 2, 1997, Ms. Hayes entered into an employment contract
with the Company which is generally terminable with 60 days prior written
notice. Pursuant to the terms of this contract, Ms. Hayes serves as President
of DeWolfe Mortgage Services, Inc. and Vice President of the Company at a
salary to be determined by the Board of Directors. In addition, the contract
includes provisions providing Ms. Hayes with severance payments at the rate of
her then current salary for one year following the termination of her
employment without cause and restricting Ms. Hayes' right to solicit employees
or associates of the Company following the termination of her employment for
the purpose of inducing such persons to terminate their employment or
association with the Company.
Additional Information with respect to Compensation Committee Interlocks and
Insider Participation on Compensation Decisions
During fiscal year 1998 Richard B. DeWolfe, the Company's Chairman and
Chief Executive Officer, made recommendations to the Compensation Committee of
the Board of Directors regarding executive officer compensation.
During fiscal year 1998 the Company paid consulting fees to Mr. Allen in
the aggregate amount of $72,000 relating to investor relations and mergers and
acquisitions.
Compensation Committee Report on Executive Compensation
The Company's executive compensation program is designed to attract,
retain and reward executives who are responsible for leading the company in
achieving its business objectives. This report is submitted by the Board of
Directors and addresses the compensation policies for fiscal 1998 as they
affected Mr. DeWolfe, in his capacity as Chief Executive Officer of the
Company, and the other executive officers of the Company.
Compensation Philosophy
The Company's executive compensation philosophy is based on the belief
that competitive compensation is essential to attract, motivate and retain
highly qualified and industrious employees. The Company's policy is to provide
total compensation that is competitive for comparable work and comparable
corporate performance. The compensation program is also designed to link the
interests of the Company's executives to the interests of the Company's
shareholders.
At present, the executive compensation program is comprised of salary,
cash incentive opportunities, long-term incentive opportunities in the form of
stock options, and benefits typically offered to executives by major
corporations. As an executive's level of responsibility increases, the greater
the mix of compensation shifts to incentive-based compensation and compensation
based on increases in the value of the Common Stock through stock-based awards.
8
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation over $1 million paid to its
chief executive officer and its four other most highly compensated executive
officers (the "named executive officers"). Qualifying performance-based
compensation is not subject to the deduction limit if certain requirements are
met. It is not anticipated that any of the named executive officers will
receive compensation for 1998, or for future years that can now be predicted,
which would not be deductible for tax purposes.
Compensation Elements
Base Salary
Salary ranges are assigned to each position based on a comparison of
DeWolfe positions with similar positions in companies of similar size in the
Company's industry, with range midpoints established at the average of the
marketplace. Actual salaries within the appropriate range depend upon
individual performance, experience and internal equity and are reviewed and may
be adjusted annually by the Company. Increases in the base salaries paid to
executive officers in 1998 were made in the discretion of the Board of
Directors based on the foregoing criteria.
Incentive Compensation
Cash bonuses paid to executive officers are determined by the Board of
Directors based on subjective criteria and on the financial performance of the
Company and are paid at various times during the year. The bonuses paid to
executive officers in 1998 were based on both performance in 1997, as well as
on year-to-date performance in 1998.
Stock Options
Under the Company's 1998 Stock Option Plan for executive officers and
other employees, the Stock Option Committee of the Board of Directors is
authorized to grant options with terms of up to ten years. The options
generally became exercisable with respect to 25% of the shares covered thereby
on the first anniversary of the date of grant and with respect to an additional
25% on each of the next three anniversary dates thereafter. In granting the
stock options to executives, the Stock Option Committee of the Board of
Directors takes into account the practices of other companies of comparable
size as well as the executive's level of responsibility and individual and
corporate performance during the prior year. In 1998, the Stock Option
Committee granted to Messrs. Harrington and Marcotte and to Mss. Griffin and
Hayes options to purchase an aggregate of 66,000 shares.
Compensation to the Chief Executive Officer
The compensation of Richard B. DeWolfe, Chairman of the Board and Chief
Executive Officer, takes into account the fact that Mr. DeWolfe is the founder
and has been the principal executive officer of the Company since its
inception. Mr. DeWolfe is responsible, to a greater degree than principal
executive officers of many companies of similar size, for the success of the
Company and the resulting value of its stock price. Accordingly, a substantial
portion of his total compensation package consists of bonus compensation and
stock options. Mr. DeWolfe's salary for 1998 was based upon a number of 1997
factors, including revenue growth, expansion, and pre-tax earnings. These
factors were given approximately equal weight in the consideration of Mr.
DeWolfe's 1998 compensation. Revenue grew by 12% in 1997. The Company completed
no acquisitions during 1997, however, it entered into an agreement to acquire
Dollar Dry Dock Real Estate, Inc. in November 1997, which was completed in
January, 1998. Pre-tax income in 1997 decreased by 43% from the record level
attained in 1996. As a result, the Company increased Mr. DeWolfe's base salary
in 1998 by 15% but did not pay Mr. DeWolfe a year end bonus. Mr. DeWolfe's
bonus compensation in 1998 was attributable to 1998 performance. In addition,
the Stock Option Committee granted to Mr. DeWolfe options to acquire 100,000
shares.
A. Clinton Allen
Paul R. Del Rossi
R. Robert Popeo
9
Compensation of Directors
The Company's outside (non-employee) directors each receive cash
compensation in the amount of $24,000 annually (provided that they attend a
minimum of 4 meetings) in consideration for serving on the Board of Directors.
In addition, Mr. Allen receives compensation at a rate of $6,000 per month in
exchange for consulting services rendered to the Company relating to investor
relations and mergers and acquisitions. In addition, each of the Company's
non-employee directors participated in the Company's 1992 Non-Employee Director
Stock Option Plan (the "1992 Director Plan") until its discontinuance in
connection with the adoption of the Company's 1998 Stock Option Plan in
February, 1998.
Under the 1992 Director Plan, each outside director automatically received
a grant of an option for 12,000 shares upon the adoption of the Plan. Each such
option was for a term of ten years and became exercisable over a period of
twenty-four months from the date of grant in equal monthly installments on a
cumulative basis. On the first business day of calendar year 1993 through 1998,
each person then serving as an outside director received an additional
automatic grant of an option to acquire 5,000 shares, each of which was also be
for a term of ten years, but was immediately exercisable in full on the date of
grant.
Options under the 1992 Director Plan are not transferable by the optionee
otherwise than by will or the laws of descent and distribution and terminate if
the optionee ceases to serve as a member of the Company's Board of Directors.
In the event of the optionee's death or permanent disability, the option
becomes exercisable in full and the optionee or his heirs, legatees or legal
representatives may exercise the option during the following three years or the
remainder of the option term, whichever period is shorter.
Under the 1998 Plan, directors are eligible to receive stock options at
the discretion of the Board of Directors, on such dates, in such amounts and at
such times, as the Board of Directors may determine.
10
THE DEWOLFE COMPANIES, INC.
STOCK PRICE PERFORMANCE GRAPH(1)
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
DeWolfe $100.00 $121.33 $136.26 $124.41 $148.10 $180.69
AMEX Market Value Index(2) $100.00 $ 90.89 $114.90 $122.24 $148.26 $150.84
S&P Retail Stores Composite(3) $100.00 $ 89.90 $ 99.16 $115.41 $165.15 $264.45
- ------------
(1) The above graph assumes a $100 investment on December 31, 1993, through the
five-year period ended December 31, 1998 in the Company's Common Stock,
the AMEX Market Value Index, and the S&P Retail Stores Composite. The
prices for the AMEX Market Value Index and the S&P Retail Stores Composite
assume the reinvestment of dividends. The DeWolfe Companies, Inc. did not
pay any dividends during the operative period.
(2) The AMEX Market Value Index includes companies whose shares are traded on
the American Stock Exchange.
(3) The S&P Retail Stores Composite is a capitalization weighted index of all
of the stocks in the Standard & Poors 500 that are involved in the
industrial sectors of the retail industry.
11
PRINCIPAL STOCKHOLDERS AND STOCKHOLDING OF MANAGEMENT
The following shows as of March 15, 1999 the number of shares of the
Company's Common Stock owned by each director and nominee for director, each
named executive officer, all executive officers and directors as a group, and
by each person known by the Company to own more than 5% of the Company's
outstanding Common Stock.
Amount and
Nature of
Beneficial Percentage
Name (1) Ownership (2) Owned (2)
- -------- ------------- ---------
Richard B. DeWolfe
The DeWolfe Companies, Inc.
80 Hayden Avenue
Lexington, Massachusetts 02173 ..................................... 2,055,817(3) 58%
Robert N. Sibcy
8044 Montgomery Road
Cincinnati, Ohio 45236 ............................................. 325,000 10%
A. Clinton Allen
A.C. Allen & Company, Inc.
1280 Massachusetts Avenue
Cambridge, Massachusetts 02138 ..................................... 303,330(4) 8%
R. Robert Popeo ..................................................... 52,000(5) 2%
Paul R. Del Rossi ................................................... 52,000(5) 2%
Patricia A. Griffin ................................................. 106,972(5) 3%
Paul J. Harrington .................................................. 86,966(5) 3%
James A. Marcotte ................................................... 13,152(5) *
Gail F. Hayes ....................................................... 2,751(5) *
All executive officers and directors as a group (8 persons) ......... 2,672,988(6) 67%
- ------------
* Denotes ownership of less than 1%.
(1) Except as specified otherwise, each person has sole voting and dispositive
power with respect to the indicated shares of Common Stock.
(2) Pursuant to the rules of the Securities and Exchange Commission, shares of
Common Stock which an individual or group has a right to acquire within 60
days pursuant to the exercise of options or warrants are deemed to be
outstanding for the purpose of computing the number of shares owned by,
and percentage ownership of, such individual or group, but are not deemed
outstanding for the purpose of computing the percentage ownership of any
other person shown in the table.
(3) Includes 114,855 shares of Common Stock held by Mr. DeWolfe's spouse and
options to acquire 11,000 shares of Common Stock beneficially owned by his
spouse, beneficial ownership of which shares is disclaimed by Mr. DeWolfe.
Includes 200,000 shares of Common Stock which Mr. DeWolfe has a right to
acquire within 60 days pursuant to the exercise of options.
12
(4) Includes (i) 7,380 shares of Common Stock owned by Mr. Allen's spouse
beneficial ownership of which shares is disclaimed by Mr. Allen; (ii)
167,000 shares of Common Stock which Mr. Allen has a right to acquire
within 60 days pursuant to the exercise of options; and (iii) 100,000
shares of common stock which Mr. Allen has a right to acquire within 60
days pursuant to the exercise of warrants.
(5) Includes the following number of shares of Common Stock which the
individual has a right to acquire within 60 days pursuant to the exercise
of options: Messrs. Popeo and Del Rossi: 52,000 shares each; Ms. Griffin:
9,550 shares; Mr. Harrington: 32,500 shares; Mr. Marcotte: 13,000 shares;
and Ms. Hayes: 2,750 shares.
(6) Includes 639,800 shares of Common Stock which executive officers and
directors have a right to acquire within 60 days pursuant to the exercise
of options and warrants. Includes shares and options held by the spouses
of certain executive officers, or directors, beneficial ownership of which
is disclaimed by the applicable officer or director.
AMENDMENT OF THE 1998 STOCK OPTION PLAN
On February 10, 1998, the Company adopted the 1998 Stock Option Plan (the
"1998 Plan"). On February 9, 1999 the Board of Directors voted unanimously to
amend the 1998 Option Plan subject to the ratification of such amendment by the
stockholders of the Company at the Annual Meeting, to increase the number of
shares of Common Stock of the Company on which options may be granted
thereunder from 400,000 to 809,700 plus any additional shares that might
thereafter become available due to the cancellation of any option granted under
the Company's 1992 Stock Option Plan or its 1992 Non-Employee Director Stock
Option Plan. A copy of the 1998 Plan, as amended, is included with this proxy
statement as Exhibit A.
The 1998 Plan is intended to benefit the Company and its subsidiaries
through offering certain present and future key employees, directors and
consultants (including sales associates) a favorable opportunity to become
holders of stock in the Company over a period of years, thereby giving them a
permanent stake in the growth and prosperity of the Company and encouraging the
continuance of their services with the Company and/or its subsidiaries. The
1998 Plan, as amended, provides as follows:
Administration
The 1998 Plan is administered by the Stock Option Committee of the Board
of Directors, and, with respect to options to be granted to members of such
Committee, by the full Board of Directors. Option grants under the 1998 Plan
may be made to employees and consultants (including sales associates) of the
Company or any subsidiary, and to members of the Company's Board of Directors,
whether or not they are employees. Options granted under the 1998 Plan are
designated as either "non-qualified stock options" or "incentive stock options"
under the Internal Revenue Code of 1986. Each option is for a term of not more
than ten years from the date of grant, and becomes exercisable in such
installments as may be determined by the Stock Option Committee. The maximum
number of options that may be granted in a single fiscal year to an individual
is 100,000.
The Stock Option Committee will have the discretion to specify the extent
to which options expire in the event of voluntary or involuntary termination of
employment or in the event of violation of any duty not to compete or not to
disclose confidential Company information. The Stock Option Committee also will
have the discretion to make stock options transferable (for example, to family
members). Under the 1998 Plan, upon a change of control of the Company, options
shall become immediately exercisable, and shall remain exercisable throughout
their entire term.
The exercise price of stock options granted under the 1998 Plan is
determined by the Stock Option Committee, but it may not be less than the fair
market value of the stock on the date the option is granted, which is defined
13
as the average of the high and low sales prices of the Company's common stock
on the American Stock Exchange on the trading day immediately preceding the
date the option is granted, unless the Stock Option Committee otherwise
determines. An incentive stock option granted to a person who owns more than
10% of the Company's outstanding stock must have an exercise price of not less
than 110% of fair market value. The full exercise price must be paid at the
time of exercise either in cash, by tendering previously acquired shares, or by
a combination of the above. The Stock Option Committee may also allow cashless
exercises. In connection with the exercise of options, the Stock Option
Committee may make loans to optionees in its discretion, subject to certain
terms and conditions not inconsistent with the 1998 Plan. Such loans shall bear
interest rates, as determined by the Stock Option Committee, which may be below
then current market rates or may be made without interest. No such loan may
exceed the fair market value of the shares covered by the options, or portion
thereof, exercised by the optionee. No loan shall have an initial term
exceeding two years, but such loans may be renewable at the discretion of the
Stock Option Committee. Such loans shall be secured by a pledge of shares of
the optionee having a fair market value of at least equal to 125% of the
principal amount of the loan.
Options granted under the 1998 Plan shall expire at such time as the Stock
Option Committee shall determine, but not later than the tenth anniversary of
the date of grant unless otherwise designated by the Stock Option Committee at
the time of the grant. Options granted under the 1998 Plan shall be exercisable
at such times and be subject to such restrictions and conditions as the Stock
Option Committee shall approve, which need not be the same for each grant or
for each participant. The Stock Option Committee may impose such restrictions
on shares acquired upon the exercise of an option as it deems advisable.
The Board of Directors of the Company may amend or terminate the 1998 Plan
in whole or in part at any time, subject to any requirement of stockholder
approval imposed by any applicable law, rule or regulation. No amendment,
modification or termination of the 1998 Plan shall adversely affect in any
material way any option previously granted under the plan, without the written
consent of the holder of the option.
Federal Income Tax Consequences
The grant of an option will have no immediate tax consequences to the
optionee or the Company. The exercise of a non-qualified stock option will
require an optionee to include in income, as compensation, the amount by which
the fair market value of the acquired shares on the exercise date exceeds the
option price. Upon a subsequent sale or taxable exchange of shares acquired
upon exercise of a non-qualified stock option, an optionee will recognize long-
or short-term capital gain or loss equal to the difference between the amount
realized on the sale and the tax basis of such shares. The Company will be
entitled (provided applicable withholding requirements are met) to a deduction
at the same time and in the same amount as the optionee is in receipt of income
in connection with the exercise of a non-qualified stock option.
If the optionee exercises an incentive stock option and does not dispose
of the acquired shares within two years after the date of grant of the option
or within one year after the date of the transfer of such shares to him (a
"disqualifying disposition"), the optionee will realize no compensation income
and any gain or loss that the optionee realizes on a subsequent disposition of
such shares will be treated as long-term capital gain or loss. For purposes of
computing the alternative minimum tax, however, the option generally will be
treated as if it were a non-qualified stock option. If an optionee makes a
disqualifying disposition, the optionee will be required to include in income,
as compensation, the lesser of (i) the difference between the option price and
the fair market value of the acquired shares on the exercise date or (ii) the
amount of gain realized on such disposition. In addition, depending on the
amount received as a result of such disposition, the optionee may realize
long-tem or short-term capital gain or loss. The Company will be entitled to a
deduction at the same time and in the same amount as the optionee is in receipt
of compensation income as a result of a disqualifying disposition. If there is
no disqualifying disposition, no deduction will be available to the Company.
14
Options Granted under the 1998 Plan
Since the 1998 Plan was amended to increase the number of shares available
thereunder, an aggregate of 377,800 options have been granted under the 1998
Plan to employees, directors and consultants (including sales associates) of
the Company, subject to shareholder approval of the 1998 Plan, as amended,
including options to acquire 100,000 shares granted to Mr. DeWolfe, options to
acquire 50,000 shares granted to Mr. Allen, options to acquire 50,000 shares
granted to Mr. Harrington, options to acquire 30,000 shares granted to Mr.
Marcotte, options to acquire 5,000 shares granted to Ms. Griffin, options to
acquire 5,000 shares granted to Ms. Hayes, options to acquire 5,000 shares
granted to Mr. Popeo, and options to acquire 5,000 shares granted to Mr. Del
Rossi. Executive officers as a group were granted an aggregate of 193,000 of
such options. Non-employee directors as a group were granted an aggregate of
60,000 of such options. The exercise price of 13,850 of the options granted to
Mr. DeWolfe was $7.94 per share, representing 110% of the fair market value of
a share of the Company's stock on the date of grant. The exercise price of the
balance of 86,150 options granted to Mr. DeWolfe and of all of the other
options granted to executive officers and directors was $7.22 per share,
representing 100% of the fair market value of a share of the Company's stock on
the date of grant. The options granted to Messrs. Allen, Del Rossi and Popeo
have a term of 10 years and were vested in full on the date of grant. All of
the other options granted to executive officers have a term of 5 years and vest
with respect to 25% of the shares covered thereby on each anniversary date of
the date of grant. As of March 15, 1999 options to purchase 687,500 shares
under the Plan were outstanding and 124,200 shares were reserved and available
for additional grants under the Plan, subject to shareholder approval. The
closing price of the Company's Common Stock on the American Stock Exchange on
March 15, 1999 was $7.00 per share.
The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or represented by proxy and entitled to vote at the
Annual Meeting is necessary to approve the amendment of the 1998 Plan. If
stockholders do not approve the amendment, all options granted by the Company
under the Plan on or after February 9, 1999 will be canceled and void.
THE BOARD OF DIRECTORS BELIEVES THAT THE APPROVAL OF THE AMENDMENT OF THE
PLAN WILL CONTINUE TO PROMOTE THE LONG-TERM FINANCIAL SUCCESS OF THE COMPANY BY
AFFORDING AN ADDITIONAL OPPORTUNITY TO ALIGN THE INTERESTS OF EMPLOYEES,
DIRECTORS AND CONSULTANTS (INCLUDING SALES ASSOCIATES) WITH THOSE OF
STOCKHOLDERS.
The amendment to the 1998 Plan to increase the number of shares subject to
the Plan can only be made with the approval of the stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
RATIFICATION OF THE AMENDMENT OF THE 1998 PLAN.
INDEPENDENT AUDITORS
The Board of Directors has selected as auditors of the Company for the
year ended December 31, 1999 the firm of Ernst & Young LLP and recommends
ratification of such selection by the shareholders. A member of the firm of
Ernst & Young LLP is expected to be present at the Annual Meeting of
Stockholders and will be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the next Annual
Meeting of Stockholders must comply with Rule 14a-8 of the Securities and
Exchange Commission issued under the Securities Exchange Act of 1934, and must
be received at the principal executive offices of the Company not later than
December 3, 1999.
15
OTHER MATTERS
The Board of Directors knows of no other matters which may come before the
Meeting. However, if any matter not now known is presented at the Meeting, it
is the intention of the persons named in the accompanying form of proxy to vote
said proxy in accordance with their judgment on such matter.
The Company will bear the cost of solicitation of proxies. Solicitations
of proxies by mail may be followed by telephone or other personal solicitation
of certain stockholders by officers or other employees of the Company.
By order of the Board of Directors,
Paul J. Harrington
Clerk
April 2, 1999
16
Exhibit A
THE DEWOLFE COMPANIES, INC.
1998 STOCK OPTION PLAN, AS AMENDED
Article 1.
Establishment, Objectives, and Duration
1.1 Establishment of the Plan. Effective February 10, 1998 (the "Effective
Date"), THE DEWOLFE COMPANIES, INC., a Massachusetts corporation (hereinafter
referred to as the "Company"), established an incentive compensation plan known
as The DeWolfe Companies, Inc. 1998 Stock Option Plan (hereinafter referred to
as the "Plan"), as set forth in this document.
Subject to the provisions of Article 12 hereof, the Plan was amended on
February 9, 1999. The Plan shall remain in effect as provided in Section 1.4
hereof.
1.2 Prior Plans Superseded. The Plan replaced and superseded the Company's
1992 Stock Option Plan, as amended (the "1992 Plan"), and the Company's 1992
Non-Employee Director Stock Option Plan, as amended (the "Director Plan"), and
as of the Effective Date, the 1992 Plan was terminated in accordance with the
provisions of Section 13 of the 1992 Plan and the 1992 Director Plan was
discontinued in accordance with the provisions of Section 10 of the Director
Plan, provided, however, that all outstanding options under the 1992 Plan and
the 1992 Director Plan shall remain in full force and effect in accordance with
the 1992 Plan and the 1992 Director Plan, as the case may be, as in effect
immediately prior to the Effective Date.
1.3 Purpose of the Plan. The purpose of this Plan is to benefit the
Company and its subsidiaries by enabling the Company to offer to certain
present and future Employees, Directors, and consultants (including sales
associates) stock based incentives in the Company, thereby giving them a stake
in the growth and prosperity of the Company and encouraging the continuance of
their services with the Company or subsidiaries.
1.4 Duration of the Plan. The Plan commenced on the Effective Date and
shall remain in effect, subject to the right of the Board of Directors to
further amend or terminate the Plan at any time pursuant to Article 9 hereof,
until all Shares subject to it shall have been purchased or acquired according
to the Plan's provisions.
Article 2.
Definitions
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
"Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
"Board" or "Board of Directors" means the Board of Directors of the
Company.
"Change of Control" of the Company shall mean:
(a) The Company is merged or consolidated or reorganized into or with
another corporation or other legal person (an "Acquiror") and as a result
of such merger, consolidation or reorganization less than 75% of the
outstanding voting securities or other capital interests of the surviving,
resulting or acquiring corporation or other legal person are owned in the
aggregate by the stockholders of the Company, directly or indirectly, imme-
A-1
diately prior to such merger, consolidation or reorganization, other than
by the Acquiror or any corporation or other legal person controlling,
controlled by or under common control with the Acquiror;
(b) The Company sells all or substantially all of its business and/or
assets to an Acquiror, of which less than 75% of the outstanding voting
securities or other capital interests are owned in the aggregate by the
stockholders of the Company, directly or indirectly, immediately prior to
such sale, other than by any corporation or other legal person controlling,
controlled by or under common control with the Acquiror; or
(c) During any period of two consecutive years, individuals who at the
beginning of any such period constitute the directors of the Company cease
for any reason to constitute at least a majority thereof unless the
election, or the nomination for election by the Company's stockholders, of
each new director of the Company was approved by a vote of at least
two-thirds of such directors of the Company then still in office who were
directors of the Company at the beginning of any such period.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation thereto.
"Committee" means the Committee as specified in Article 3 herein appointed
by the Board to administer the Plan with respect to grants of Options.
"Common Stock" means the common stock of the Company.
"Company" means The DeWolfe Companies, Inc. a Massachusetts corporation,
as well as any successor to such entity as provided in Article 11 herein.
"Director" means any individual who is a member of the Board of Directors
of the Company.
"Disability" shall have the meaning ascribed to such term in the
Participant's governing long-term disability plan. If no long term disability
plan is in place with respect to a Participant, then with respect to that
Participant, Disability shall mean: for the first 24 months of disability, that
the Participant is unable to perform his or her job; thereafter, that the
Participant is unable to perform any and every duty of any gainful occupation
for which the Participant is reasonably suited by training, education or
experience.
"Effective Date" shall have the meaning ascribed to such term in Section
1.1 hereof.
"Employee" means any employee of the Company or any Subsidiary.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor act thereto.
"Fair Market Value" shall (i) for purposes of setting any Option Price,
unless otherwise required by any applicable provision of the Code or any
regulations issued thereunder, or unless the Committee otherwise determines,
mean as of the date of grant of the Option, the average of the high and low
sales prices of the Common Stock on the American Stock Exchange (as reported in
The Wall Street Journal) on the trading date immediately preceding such date of
grant; and (ii) for purposes of the valuation of any Shares delivered in
payment of the Option Price upon the exercise of an Option, for purposes of the
valuation of any Shares withheld to pay taxes due in connection with the
exercise of an Option, mean the average of the high and low sales prices of the
Common Stock on the American Stock Exchange (as reported in The Wall Street
Journal) on the date of exercise (or if the date of exercise is not a trading
day, on the trading day next preceding the date of exercise).
"Incentive Stock Option" or "ISO" means an option to purchase Shares
granted under Article 6 herein and which is designated as an Incentive Stock
Option and which is intended to meet the requirements of Code Section 422.
A-2
"Insider" shall mean an individual who is, on the relevant date, an
officer, director or more than ten percent (10%) beneficial owner of any class
of the Company's equity securities that is registered pursuant to Section 12 of
the Exchange Act, all as defined under Section 16 of the Exchange Act and the
regulations promulgated thereunder.
"Named Executive Officer" means a Participant who is one of the group of
covered employees as defined in the regulations promulgated under Code Section
162(m), or any successor statute.
"Nonqualified Stock Option" or "NQSO" means an option to purchase Shares
granted under Article 6 herein and which is not intended to meet the
requirements of Code Section 422.
"Option" means an Incentive Stock Option or a Nonqualified Stock Option,
as described in Article 6 herein.
"Option Agreement" means a writing provided by the Company to each
Participant setting forth the terms and provisions applicable to Options
granted under this Plan. The Participant's acceptance of the terms of the
Option Agreement shall be evidenced by the continued rendering by the
Participant of services on behalf of the Company or its subsidiaries without
written objection before any exercise of the Option. If the Participant objects
in writing, the grant of the Option shall be revoked.
"Option Price" means the price at which a Share may be purchased by a
Participant pursuant to an Option.
"Participant" means an Employee, a Director or a consultant (including a
sales associate) who has outstanding an Option granted under the Plan.
"Performance-Based Exception" means the exception for performance-based
compensation from the tax deductibility limitations of Code Section 162(m).
"Retirement" means the Participant's termination of employment with the
Company or its Subsidiaries on or after the date on which the Participant
becomes eligible to receive normal or early retirement benefits under The
DeWolfe Companies, Inc. 401(k) Retirement Plan, or such successor plan as may
be implemented in the future. If the Participant is not a participant in the
401(k) Retirement Plan, then retirement may occur on or after the date the
Participant has achieved the minimum age or combination of age and service with
the Company and its Subsidiaries that would be required to receive an immediate
annuity from the 401(k) Retirement Plan if he or she were a participant.
Notwithstanding the foregoing, the Committee may, in its sole discretion,
determine that a Participant has met the criteria for a Retirement termination
from the Company.
"Shares" means shares of Common Stock of the Company.
"Subsidiary" means any corporation, partnership, joint venture, affiliate,
or other entity in which the Company is the direct or indirect beneficial owner
of not less than 20% of all issued and outstanding equity interests.
Article 3.
Administration
3.1 The Committee. The Plan shall be administered by the Stock Option
Committee of the Board, or by any other Committee appointed by the Board. If
and to the extent that no Committee exists that has the authority to administer
the Plan, the functions of the Committee shall be exercised by the full Board.
Notwithstanding the foregoing, no option shall be granted to any member of the
Committee unless such grant is approved by the unanimous vote of the Board
(which may be by written consent), and with respect to any such Options to be
granted to a member of the Committee, any reference to the Committee in this
Plan shall instead refer to the full Board.
3.2 Authority of the Committee. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Employees,
A-3
Directors and consultants (including sales associates) who shall participate in
the Plan; determine the sizes and types of Options; determine the terms and
conditions of Options in a manner consistent with the Plan; construe and
interpret the Plan and any agreement or instrument entered into under the Plan;
establish, amend, or waive rules and regulations for the Plan's administration;
and (subject to the provisions of Article 9 herein) amend the terms and
conditions of any outstanding Option to the extent such terms and conditions
are within the discretion of the Committee as provided in the Plan. Further,
the Committee shall make all other determinations which may be necessary or
advisable for the administration of the Plan. As permitted by law, the
Committee may delegate the authority granted to it herein.
3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding on all persons,
including the Company, its stockholders, Employees, consultants (including
sales associates) Participants, and their estates and beneficiaries.
Article 4.
Shares Subject to the Plan and Maximum Number of Shares Subject to Options
4.1 Shares Available for Options. Subject to adjustment as provided below
in this Section 4.1 and in Section 4.3, as of the date hereof, Options to
purchase an aggregate of 809,700 Shares may be granted under this Plan, which
may be either authorized and unissued Shares or Shares held in or acquired for
the treasury of the Company. Upon:
(a) a cancellation, termination, expiration, forfeiture, or lapse for any
reason of any Option under this Plan, under the 1992 Plan or under the
Director Plan; or
(b) payment of an Option Price and/or payment of any taxes arising upon
exercise of an Option under this Plan, under the 1992 Plan or under the
Director Plan with previously acquired Shares or by withholding Shares
which otherwise would be acquired on exercise under this Plan, under the
1992 Plan or under the Director Plan,
then the number of Shares underlying any such Option which were not issued as a
result of any of the foregoing actions shall become available for the purposes
of Options which may thereafter granted under this Plan.
4.2 Individual Participant Limitations. Unless and until the Committee
determines that an Option to a Named Executive Officer shall not be designed to
comply with the Performance-Based Exception, and subject to adjustment as
provided in Section 4.3 herein, the maximum aggregate number of Options that
may be granted in any one fiscal year to a Participant shall be 100,000.
4.3 Adjustments in Authorized Shares. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether
or not such reorganization comes within the definition of such term in Code
Section 368) or any partial or complete liquidation of the Company, such
adjustment shall be made in the number and class of Shares available for
Options, the number and class of and/or price of Shares subject to outstanding
Options granted under the Plan and the number of Shares set forth in Sections
4.1 and 4.2, as may be determined to be appropriate and equitable by the
Committee, in its sole discretion, to prevent dilution or enlargement of
rights; provided, however, that the number subject to any Option shall always
be a whole number.
A-4
Article 5.
Eligibility and Participation
5.1 Eligibility. Persons eligible to participate in this Plan include all
officers and other employees of the Company and its Subsidiaries, Directors and
consultants (including sales associates) to the Company and its Subsidiaries,
as determined by the Committee.
5.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees, Directors
and consultants (including sales associates), those to whom Options shall be
granted and shall determine the terms, conditions and amount of each Option.
Article 6.
Granting of Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to one or more Participants in such number, and upon
such terms, and at any time and from time to time as shall be determined by the
Committee. The Committee may grant Nonqualified Stock Options or Incentive
Stock Options. The Committee shall have complete discretion in determining the
number of Options granted to each Participant (subject to Article 4 herein).
6.2 Option Agreement. Each Option grant shall be evidenced by an Option
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine. The Option Agreement with respect to the Option also
shall specify whether the Option is intended to be an ISO within the meaning of
Code Section 422, or an NQSO whose grant is intended not to fall under the
provisions of Code Section 422.
6.3 Option Price. The Committee shall designate the Option Price for each
grant of an Option under this Plan which Option Price shall be at least equal
to one hundred percent (100%) of the Fair Market Value of a Share on the date
the Option is granted, and which Option Price may not be subsequently changed
by the Committee except pursuant to Section 4.3 hereof or to the extent
provided in the Option Agreement.
6.4 Duration of Options. Each Option granted to a Participant shall expire
at such time as the Committee shall determine at the time of grant; provided,
however, that unless otherwise designated by the Committee at the time of
grant, no Option shall be exercisable later than the tenth (10th) anniversary
date of its grant.
6.5 Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant.
6.6 Payment. Options granted under this Article 6 shall be exercised by
the delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares. The Option Price upon exercise of
any Option shall be payable to the Company in full either:
(a) in cash or its equivalent,
(b) by tendering previously acquired Shares having an aggregate Fair
Market Value at the time of exercise equal to the total Option Price, or
(c) by a combination of (a) and (b).
A-5
The Committee also may allow cashless exercises as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law. As soon as practicable
after receipt of a written notification of exercise and full payment, the
Company shall deliver to the Participant, in the Participant's name, Share
certificates in an appropriate amount based upon the number of Shares purchased
under the Option(s).
In connection with the exercise of options granted under the Plan, the
Company may make loans to the Participants as the Committee, in its discretion,
may determine. Such loans shall be subject to the following terms and
conditions and such other terms and conditions as the Committee shall determine
not inconsistent with the Plan. Such loans shall bear interest at such rates as
the Committee shall determine from time to time, which rates may be below then
current market rates or may be made without interest. In no event may any such
loan exceed the Fair Market Value, at the date of exercise, of the shares
covered by the Option, or portion thereof, exercised by the Optionee. No loan
shall have an initial term exceeding two years, but any such loan may be
renewable at the discretion of the Committee. When a loan shall have been made,
Shares having a fair market value at least equal to 125 percent of the
principal amount of the loan shall be pledged by the Participant to the Company
as security for payment of the unpaid balance of the loan.
6.7 Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws
applicable to such Shares.
6.8 Termination of Employment, Director Relationship or Consulting
Arrangement. Each Option Agreement shall set forth the extent to which the
Participant shall have the right to exercise the Option following termination
of the Participant's employment, service on the Board of Directors, or
consulting arrangement with the Company and/or its Subsidiaries. Such
provisions shall be determined in the sole discretion of the Committee, shall
be included in the Option Agreement entered into with each Participant, need
not be uniform among all Options issued pursuant to the Plan, and may reflect
distinctions based on the reasons for termination of employment, director
relationship or consulting agreement, including, but not limited to,
termination of employment for cause or good reason, or reasons relating to the
breach or threatened breach of restrictive covenants. Subject to Article 8, in
the event that a Participant's Option Agreement does not set forth such
termination provisions, the following termination provisions shall apply:
(a) In the event a Participant's employment, director relationship or
consulting arrangement with the Company and/or its Subsidiaries is
terminated for any reason other than death, Disability or Retirement, all
Options held by the Participant shall expire and all rights to purchase
Shares thereunder shall terminate immediately; provided, however, that
notwithstanding the foregoing, all Options to which the Participant has a
vested right immediately prior to such termination shall be exercisable
until (i) 30 days following the date of termination or (ii) the expiration
date of the Option, whichever is earlier.
(b) In the event a Participant's employment, director relationship or
consulting arrangement with the Company and/or its Subsidiaries is
terminated due to death or Disability, all Options shall immediately become
fully vested on the date of termination.
(c) Subject to Article 8, in the event of termination of the
Participant's employment, director relationship or consulting arrangement,
due to death or Disability, all Options in which the Participant has a
vested right upon termination shall be exercisable for a period of one (1)
year following such termination, or until the expiration date of the
Option, whichever is later.
A-6
(d) Subject to Article 8, in the event of termination of the
Participant's employment, director relationship, or consulting arrangement,
due to Retirement, all Options in which the Participant has a vested right
upon termination shall be exercisable until the date which is (i) three
years following the date of termination or (ii) the expiration date of the
Option, whichever is earlier.
6.9 Nontransferability of Options.
(a) Incentive Stock Options. No ISO granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, all ISOs
granted to a Participant under the Plan shall be exercisable during his or her
lifetime only by such Participant.
(b) Nonqualified Stock Options. Except as otherwise provided in a
Participant's Option Agreement, no NQSO granted under this Article 6 may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further, except
as otherwise provided in a Participant's Option Agreement, all NQSOs granted to
a Participant under this Article 6 shall be exercisable during his or her
lifetime only by such Participant.
Article 7.
Rights of Employees, Directors and Consultants
7.1 Employment or Consulting Arrangement. Nothing in the Plan shall
interfere with or limit in any way the right of the Company to terminate any
Participant's employment or consulting arrangement at any time, nor confer upon
any Participant any right to continue in the employ of or consulting
arrangement with the Company or any Subsidiary, nor interfere with or limit in
any way the right of the Board to remove any Participant who is a Director from
service on the Board at any time in accordance with the provisions of the
Company's By-laws and applicable law.
For purposes of this Plan, temporary absence from employment because of
illness, vacation, approved leaves of absence, and transfers of employment
among the Company and its Subsidiaries, shall not be considered to terminate
employment or to interrupt continuous employment. Temporary cessation of the
provision of consulting services because of illness, vacation or any other
reason approved in advance by the Company shall not be considered a termination
of the consulting arrangement or an interruption of the continuity thereof.
Conversion of a Participant's employment relationship to a consulting
arrangement or from a consulting arrangement to an employment relationship
shall not result in termination of previously granted Options.
7.2 Participation. No Employee, Director or consultant shall have the
right to be selected to receive an Option under this Plan, or, having been so
selected, to be selected to receive a future Option.
Article 8.
Change of Control
Upon the occurrence of a Change of Control, unless otherwise specifically
prohibited under applicable laws, or by the rules and regulations of any
governing governmental agencies or national securities exchanges, any and all
Options granted hereunder shall become immediately exercisable, and shall
remain exercisable throughout their entire term.
Article 9.
Amendment, Modification, and Termination
9.1 Amendment, Modification, and Termination. The Board may at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole or
in part, subject to any requirement of stockholder approval imposed by
applicable law, rule or regulation.
A-7
9.2 Options Previously Granted. No termination, amendment, or modification
of the Plan shall adversely affect in any material way any Option previously
granted under the Plan, without the written consent of the Participant holding
such Option.
Article 10.
Withholding
10.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of the Plan.
10.2 Share Withholding. With respect to withholding required upon the
exercise of Options, Participants may elect, subject to the approval of the
Committee, to satisfy the withholding requirement, in whole or in part, by
having the Company withhold Shares having a Fair Market Value on the date the
tax is to be determined equal to the minimum statutory total tax which would be
imposed on the transaction. All such elections shall be irrevocable, made in
writing, signed by the Participant, and shall be subject to any restrictions or
limitations that the Committee, in its sole discretion, deems appropriate.
Article 11.
Successors
All obligations of the Company under the Plan with respect to Options
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect merger,
consolidation, purchase of all or substantially all of the business and/or
assets of the Company or otherwise.
Article 12.
Shareholder Ratification
The Plan, as originally adopted by the Board of Directors on February 10,
1998, was ratified by the stockholders of the Company on May 12, 1998. The
amendments to the Plan reflected herein were adopted by the Board of Directors
on February 9, 1999 subject to the ratification by the stockholders of the
Company. If such amendments are ratified by the affirmative vote of the holders
of a majority of the outstanding shares of Common Stock of the Company voting
in person or by proxy at the 1999 Annual Stockholders' Meeting, they shall be
deemed to have become effective on the February 9, 1999. Options may be granted
under the Plan prior to ratification of the amendments by the stockholders of
the Company and, in each such case, the date of grant shall be determined
without reference to the date of ratification of the Plan by stockholders of
the Company; provided, however that if the Plan is not ratified by
stockholders, all options granted hereunder shall be canceled and void.
Article 13.
Legal Construction
13.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural
shall include the singular and the singular shall include the plural.
13.2 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
A-8
13.3 Requirements of Law. The granting of Options and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
13.4 Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
the Plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
13.5 Governing Law. To the extent not preempted by federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the Commonwealth of Massachusetts.
A-9
THE DEWOLFE COMPANIES, INC.
PROXY FOR 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 11, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
The undersigned, revoking previous proxies relating to these shares, hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement dated April 2, 1999 in connection with the Annual Meeting to
be held on May 11, 1999 at 10:00 a.m. at the Newton Marriott, in Newton,
Massachusetts, and hereby appoints Richard B. DeWolfe and Paul J.
Harrington, and each of them (with full power to act alone), the attorneys
and proxies of the undersigned, with power of substitution to each, to vote
all shares of the Common stock of the DeWolfe Companies, Inc. registered in
the name provided herein which the undersigned is entitled to vote at the
1999 Annual Meeting of Stockholders, and at any adjournment or adjournments
thereof, with all the powers the undersigned would have if personally
present. Without limiting the general authorization hereby given, said
proxies are, and each of them is, instructed to vote or act as follows on
the proposals set forth in said Proxy Statement and on such other matters as
may properly come before the meeting.
SEE REVERSE SIDE. If you wish to vote in accordance with the Board of
Directors' recommendations, just sign on the reverse side. You need not mark
any boxes. SEE REVERSE SIDE
[X] Please mark votes as in this example.
This proxy, when properly executed, will be voted in the manner directed
herein. If no direction is made, this Proxy will be voted FOR all of the Board
of Directors' nominees, FOR Proposal 2, and FOR Proposal 3.
The Board of Directors recommends a vote FOR Proposals 1, 2 and 3.
1. To fix the size of the Board at four and to elect the nominees named in the
Proxy Statement.
Nominees: Richard B. DeWolfe, A. Clinton Allen, Paul R. Del Rossi and R.
Robert Popeo
[ ] For [ ] withheld [ ]
-----------------------------------------------
For all nominees except as noted above
2. To approve the amendment to the Company's 1998 Stock Option Plan.
[ ] For [ ] Against [ ] Abstain
3. To ratify the Company's Selection of Ernst & Young LLP as the Company's
Independent Auditors.
[ ] For [ ] Against [ ] Abstain
MARK HERE FOR [ ] MARK HERE IF YOU [ ]
ADDRESS CHANGE PLAN TO ATTEND
AND NOTE AT LEFT THE MEETING
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
Signature: Date:
--------------------------------------- ------------------
Signature: Date:
--------------------------------------- ------------------